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Using Automation to Simplify Your Finances

As the summer nears it’s end and kids start running off to school, you’re probably thinking that time is going to be at a premium. The end of summer means the end of a casual lifestyle, even if you’re still working, when bosses are on vacation and employees are more relaxed. While that may be the case, it’s also a perfect time to put a little extra work in this Labor Day to make sure you don’t have to labor nearly as hard.

By doing it step by step and slowly, you can ease into it and appreciate how easy it makes your life.

What to Automate

One of the first things to do, if you haven’t already, is to make sure that you are signed up for direct deposit. This will automatically put your paycheck into your bank account.

Hopefully, you are already having part of your paycheck automatically invested in a retirement account, and/or some of it sent to a savings account for your emergency fund.

Next, set up your bills for automatic deduction. Some of the easiest bills to get set up on automatic withdrawal are insurance premiums, mortgage payments, car loan payments, student loan payments and other installment payments.

If you make regular contributions to an IRA or some other investment account, these are easy to automate as well. The key here is to pick payments or debits that are regularly scheduled and are fixed amounts.

You know these are expenses that will come out regularly, so you might as well have them automatically deducted from your account.

For bills that change, like an electricity bill, you can still set it up to be automatic but you need to be more careful of overdrafts.

Many utilities have automatic withdrawal plans, in which they just withdraw the amount you owe each month, as it varies. You still get a statement, though. (Sign up for paperless if you can, and have it sent right to your email inbox.)

Online Bill Pay

For bills that vary a lot, like credit card payments, you’ll want to setup online bill pay but don’t automate it. This makes it so that you can pay your bill with a few clicks of the mouse, rather then relying on mailing in a paper check (which might get lost). You can do this directly on your credit card’s website.

If you have several credit cards, try to get them all on the same due date. Many credit cards will let you move due dates (usually by shortening your current period). This let’s you take care of them all at once, making it harder to forget.

Check In

Automation doesn’t mean completely hands off. You should still check in each month to make sure everything is still running smoothly. I track my net worth each month and use that as an opportunity to log into each account and look them over.

This is especially important for credit card statements, as you lose some rights if you don’t catch fraud early. One of the risks of automation is taking too cavalier an attitude towards your finances. It’s still important, you’re just having the computer do some of the work!

Do you have any tips for financial automation?

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All my ‘known’ bills show up in my Quicken register two days before the first of the month, including estimated groceries each week. That way I know what is left for the unexpected bills or dining out treats. Then I down load daily to keep a watch on things since we live month to month.

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